Forward charge mechanism

[Bijay Shrestha]

What is Forward charge mechanism under service tax ???

How is it different from RCM ???

Please suggest.

[Ganeshan Kalyani]

Liability of service tax that need to be paid by recipient of service means reverse charge. services which are not under reverse charge list are covered by forward charge where service provider will have to pay the tax.

[DR.MARIAPPAN GOVINDARAJAN]

In forward charge mechanism the service provider is to levy service tax and remit the same to the credit of the Central Government.

In Reverse Charge mechanism, which is opposite to Forward charge, the service recipient is to pay the service tax to the credit of Central Government on services notified by the Central Government for this purpose.

[Suryanarayana Sathineni]

Dear Friend,

While concurring with the views expressed by my learned friends, I would like to put in a simple way as per below :

In forward charge Service provider will pay and in reverse charge Person liable to pay the ST will pay.in terms of Sec.68(2) of FA,1994.

Best Regards

Suryanarayana

[Ganeshan Kalyani]

Sri Suryanarayana Ji, for discussion purpose i would like to discuss on the subject in view of upcoming GST .

Under GST the threshold is so low that now every assessee would have to get themself register. so all would be paying tax and doing compliances . then why was there a need to bring reverse charge concept under GST .

Request you to please share your views on this .

[Suryanarayana Sathineni]

Dear Ganesh Ji,

In my view,this aspect is totally depend on the Government's view and as far as the Government wanted to collect the Service tax on the services provided by foreign service providers they may continue the reverse charge mechanism since the GOI is not having any Authority to collect the tax from the foreign service providers who provides the services from a non-taxable territory.

In view of this, we have no option except, to leave this to the wisdom of the Government whether to continue the reverse charge concept in the proposed GST or not.

Best Regards

Suryanarayana

[Bijay Shrestha]

Thanks all for kind suggestions.

As far as reverse charge under GST is concerned, in my view it is for better compliance and to reduce burden on certain assessees, govt is including in GST. but as suryanarayan sir said, final view is still to be decided by the govt. lets see what comes up.

AI Summary

Forward charge: service provider remits tax, while reverse charge makes recipient liable for notified services.
Forward charge makes the service provider liable to levy and remit service tax to the central government for services not under reverse charge. Reverse charge shifts liability to the service recipient for services notified by the government. Under GST, reverse charge may be retained to permit tax collection on services supplied from non taxable territories or foreign providers when the government cannot collect directly from the foreign supplier, thereby securing revenue and affecting compliance obligations.